Friday, February 4, 2011

Put Activity Accelerates on General Electric Company (GE)

The stock is down 38 cents at $20.47.
Schaeffer's knows options but I'm not sure these are protective puts, they might be directional bets.
Here's Schaeffer's:

Today's puts may have been purchased as protection

Dow bigwig General Electric Company (GE) has seen a surge in put activity today, with roughly 37,000 contracts crossing the tape -- well above the equity's expected single-session put volume of just 25,000 contracts. In fact, today's preference for puts is a sharp deviation from the norm for GE, which currently boasts a 10-day call/put volume ratio of 3.27 on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). Not only does this ratio reveal that more than three times as many calls as puts have been initiated on GE during recent weeks, but it also ranks above 70% of all other readings taken during the past year. In other words, speculators on the ISE and CBOE have shown an increased appetite for bullish bets on GE lately.

In the same optimistic vein, GE's Schaeffer's put/call open interest ratio (SOIR) -- which measures put open interest relative to call open interest among options in the front three months -- arrives at 0.88, in the bullish 17th annual percentile.

In fact, calls dominate the landscape in GE's February series of options. Peak call open interest of roughly 96,000 contracts can be found at the 19 strike, with an additional 90,636 calls open at the 20 strike. Meanwhile, the February 19 strike houses peak put open interest of fewer than 42,000 contracts.
Turning to today's activity, though, we find that traders have shown an overwhelming preference for GE's March 16 put, with over 15,000 contracts changing hands -- 99% of which traded at the ask price, suggesting that they were likely purchased. With open interest exceeding today's volume at this strike, though, we cannot yet confirm whether fresh positions are being added here. However, with GE hovering around the $20 level, these back-month puts are easily out of the money....MORE